What is the role of HR in outsourcing?

December 6, 2010

Both HR and outsourcing have truly come of age over the past few decades. After all, the HR department was once considered to be just the admin department but today the HR department is increasingly filling a more strategic role within a business and is becoming important for helping organizations to achieve cost reductions through downsizing and changing the way jobs themselves are structured. Meanwhile, outsourcing itself has become a key strategy for organizations to achieve significant cost savings.

So just what is the role of HR in outsourcing? A recent and lengthy article by Ann Bevitt and Alistair Maughan of Morrison & Foerster LLP is well worth reading as it discussed the critical role of HR in the success or failure of outsourcing projects. The authors pointed out that while there are probably few outsourcing projects that have been abandoned purely due to HR issues, an outsourcing deal can be derailed if such issues are not addressed appropriately and at the right time. Hence, the authors made the following suggestions for the early stages of outsourcing – especially if staff transfers will occur:

Early Engagement. The authors noted that best practices would suggest that having HR teams deeply embedded into any outsourcing project throughout the project’s lifecycle would reduce both current and future HR related problems and issues. In other words, the HR team should be involved in an outsourcing project early on in order to scope out any potential “red flag” issues as well as be involved in the proposal stage since both HR and the potential outsourcer will need to be aware of any staff transfers along with associated costs. This will help to avoid further surprises in the future. Moreover and if staff transfers will occur, HR can also assist both their own organization and the outsourcer to identify key employees who could be matched with key roles in the outsourcer’s organization.

Contractual Negotiations. When contractual negotiations begin, the authors noted that an organization’s HR team can give advice regarding specific contractual terms that may impact an organization’s employees. This is especially important if an outsourcing agreement will result in staff transfers or redundancies as there will be both obvious and hidden costs and legal issues associated with both.

Employee Communications. Finally, the authors stated that the HR team will need to play a critical role in managing employee communications. This role will include briefing managers to ensure that correct information is given to staff as well as being prepared themselves so that they can also handle direct questions from staff. After all, the successful management of employee communications throughout the outsourcing process that will prove crucial towards contributing towards the success or failure of an outsourcing project.

One the outsourcing project is live, the authors pointed out that an organization’s HR team will need to oversee the transfer of any employees and their data to the outsourcer as well as monitor the success of the project. And once the exit or project completion or project renewal stage is reached, HR will also need to be involved in any further staff and data transfer issues as well as any contract renegotiations or negotiations regarding contract extensions.

However, we want to also ask you our readers about the role of HR in outsourcing. In other words, what do you think is the proper role of HR in outsourcing? Moreover, have there been any outsourcing projects that you have directly been involved in where HR had been a major contributor towards its success or failure? Feel free to post your comments about your personal experiences below (And we would definitely like to hear from any HR professionals out there).